© Reuters. A man counts US dollar bills at a currency exchange shop in Beirut.
By Kevin Buckland TOKYO (Reuters) – The dollar stabilized near a nearly two-week low against a basket of its peers on Tuesday, moving in tandem with a pullback in Treasury yields from recent spikes despite signs of a strong economic recovery in the United States. It sank to 92.527 in the Asian session, its weakest level since March 25. The smoothest turn comes less than a week after hitting a nearly five-month high at 93,439. The yen continued to rebound from a more than a year low near 111 per dollar, briefly strengthening below 110 on Tuesday. The euro extended its rise from a nearly five-month low near $ 1.17 to trade as high as $ 1.1821. The dollar has risen strongly this year, along with Treasury yields, as investors are betting on a rebound from the American pandemic faster than other developed nations amid massive stimulus and aggressive vaccines. But the dollar’s slide this week, even after Friday’s much stronger-than-expected monthly payroll data was followed by Monday’s highest reading for service industry activity on record, may indicate that much of the bullish outlook is discounted for now. “While the United States looks exceptional, the normalization of COVID over time means that the rest of the world will converge,” Mark McCormick (NYSE :), TD Securities’ global head of foreign exchange strategy, wrote in a note to the client. “The level of the USD has now surpassed the rebound in growth expectations outside the United States,” which means that “there is room for a pause in the USD” in its recent uptrend, he wrote. Benchmark 10-year Treasury yields continued their decline on Tuesday, falling below 1.7% at the beginning of the Asian session, from a high of 1.776% last week, a level not seen since January last year. That’s even as the strong economic outlook propelled US stocks to all-time highs. However, Westpac strategists see room for more dollar gains, saying the robust data series “cements the USD’s unmatched growth recovery credentials.” “DXY has not taken advantage of strong macroeconomic winds,” they wrote, referring to the dollar index. “Setbacks to 92 should be bought to hit Q3 2020 highs around 94.50.” On the other hand, the Australian dollar, considered a surrogate for risk appetite, fell slightly to $ 0.76415 on Tuesday, after rising 0.8% at the beginning of the week. The Reserve Bank of Australia left the policy unchanged on Tuesday, as expected. The British pound rose to a two-and-a-half week high of $ 1.3915 in Asia, building on a 0.6% advance from the previous session. In cryptocurrencies, bitcoin traded around $ 58,882 on Tuesday, pulling back a bit after a two-day gain. It hit a record high of $ 61,781.83 in the middle of last month. Cryptocurrency market capitalization hit an all-time high of $ 2 trillion on Monday, according to data and market trackers CoinGecko and Blockfolio, as gains in recent months drew demand from institutional and retail investors.